Congratulations to Brandan Hallaq, Esq. for winning his first Motion for Summary Disposition before the Honorable Archie Brown in the Washtenaw County Circuit Court. Mr. Hallaq successfully drafted and argued the motion on behalf of a condominium association against a co-owner for numerous bylaw infractions and violations of the Michigan Condominium Act. In addition to obtaining an order compelling the co-owner to comply with the condominium documents, the Court granted an award of attorneys fees in the association’s favor.

Mr. Hallaq graduated with his Juris Doctor, cum laude, from Wayne State University Law School in May 2016 before joining our Livonia office. Mr. Hallaq focuses his practice in the areas of community association, business, and real estate law. He may be reached at (734) 261-2400 or bhallaq@cmda-law.com.

Over the past decade, the popularity of living in a common interest community, particularly condominium and homeowners associations, has risen significantly. According to recent statistics provided by Community Associations Institute, there are over 340,000 community associations, over 26 million housing units, and over 68 million residents living in these associations in the United States. As these numbers continue to grow, the range of differences between associations grows larger. With so many new associations forming each year, and so many residents choosing to live in these types of developments, every condominium and homeowners association should consider trademarking its name and logo.

WHAT IS A TRADEMARK?A trademark includes names, slogans, and/or symbols that identify and distinguish goods and/or services. A trademark grants the exclusive right to use the name or logo to the owner of the mark. Owning a trademark is important because it puts the world on notice that a particular name or logo is owned and being used to identify a specific product or service. Owning a trademark also allows the owner to file a lawsuit in federal court to seek recourse against anyone who has unlawfully used the trademark. Upon being granted a trademark by the United States Patent and Trademark Office, the owner has the exclusive right to use the trademark throughout the entire country. Additionally, as the owner of the trademark, you can use the ® symbol which indicates to others that the name or logo is a registered trademark. If one has not yet applied for registration but nonetheless wishes to put the world on notice of its claim and use of a name or logo, the ™ symbol may be used, although it does not confer the exclusive right to use the name or logo.

DIFFERENCES BETWEEN APPLYING FOR A TRADEMARK AND INCORPORATING UNDER STATE LAWIncorporation under state law provides some protections for business entities wishing to utilize a specific name or logo. Most condominium and homeowners associations are formed as nonprofit corporations in Michigan. In order to form the corporation, the association must file Articles of Incorporation with the State and select a unique name. The State will not permit any business entity to form using a name that is already in use by another entity. Accordingly, if an association is formed in one state with a particular name, no other entity may be formed using that same name in the same state. However, nothing prevents another entity from using the same name, or similar names, in a different state. Additionally, individuals might use the name without registering as a business entity with the state.

WHY APPLY FOR A TRADEMARK?Many people are surprised to learn that the cost of obtaining a trademark is extremely reasonable in light of all the benefits it confers. The cost of submitting an application for a trademark ranges between $225 and $400. The process can require a legal analysis but many times will not be extremely time consuming which means the cost of hiring an attorney should not be prohibitive. If a particular association is affiliated with or administers the affairs for multiple developments, a specific brand name and logo will be very important. Trademarks are particularly important in this situation to protect associations that have expended resources in creating and maintaining a positive reputation in the community from having competitors steal their names and/or logos in order to profit or trick the public into believing that the two entities are related.

Condominium projects now include (1) site condominiums with detached buildings, (2) a number of identical or similarly constructed smaller buildings, each housing 2 or more Units, (3) large high rise buildings with potentially hundreds or thousands of Units, (4) strictly residential developments, (5) strictly commercial developments, (6) mixed-use developments, (7) condominiums dedicated to mobile homes and other recreational vehicles, and (8) condominiums created specifically for boat docks. Whether your association is small or large, in order to prevent others from using the association name, obtaining a trademark is the best way to protect your rights.

For smaller associations that only manage one development, a trademark is still an important tool for the association to protect itself against hostile or uncooperative members. As far too many associations and board members are familiar, it is not uncommon for an angry member of the association to go rogue and create a website or social media accounts in the association’s name. The member might do this for a number of reasons but often times it is done merely to cause trouble and to provide a platform to bad-mouth the association and its board members. Pursuant to the Lanham Act, 15 U.S.C. § 1125, obtaining a trademark in the association’s name prohibits any other person or entity from creating a domain name that infringes upon said trademark. In these situations, having a trademark of the association’s name provides the association with significantly greater resources to take swift action to prevent this behavior.

For example, in Board of Directors of Sapphire Bay Condominiums West v Simpson, 328 F Supp 2d 571 (D.V.I. 2004), affirmed by 129 F App’x 711 (3d Cir 2005), a condominium association sued an unhappy co-owner and obtained a preliminary injunction preventing the co-owner from operating a website under the name of the association. In that case, the co-owner registered the domain name “sapphirebaycondos.com” and used that name to operate a website where he made negative statements about the association and its board of directors. However, because the association did not have a registered trademark, the association’s options for recovery against the co-owner were more limited.

The Association eventually lost at trial and was unable to obtain a permanent injunction or monetary damages against the co-owner. Board of Directors of Sapphire Bay Condominiums West v Simpson, No. CV 04-62, 2014 WL 4067175 (D.V.I. 2014), affirmed by, 641 F App’x 113 (3d Cir 2015). The association may have been successful if it had a registered trademark as opposed to simply relying on common law protections. Even if the association in the Sapphire Bay case had prevailed at trial, it may not have been able to prevent someone in another state from using that domain name. Furthermore, because there was no registered trademark, nothing prevents another entity from attempting to obtain a trademark in the association’s name.

As mentioned, having a registered trademark provides the ultimate protection. Registration of a trademark provides constructive notice to all others throughout the country that the trademark is in use as well as the name of the owner. Having a registered mark also provides the opportunity to recover monetary damages for infringement including attorney’s fees and treble damages in certain cases. Additionally, using a registered trademark for five continuous years can grant the owner of the mark “incontestable” status meaning the exclusive right to use of the trademark is conclusively established.

CONCLUSIONWhether your association only operates in one state and only manages a single small development, or whether your association is managing a large number of properties throughout the country, obtaining a trademark of the association’s name and logo will undoubtedly be a valuable asset. Associations can use the trademark to protect their brand and reputation from being confused with competitors and can protect property values from nefarious, difficult co-owners. Additionally, associations can use the trademark to prevent others from hijacking the association’s name online. Because of the affordability of obtaining a trademark, it is something every association should at least consider and discuss with legal counsel.

Brandan Hallaq is an attorney in our Livonia office where he focuses his practice in the areas of business and real estate law. He may be reached at (734) 261-2400 or bhallaq@cmda-law.com.

On December 15, 2016, the Michigan Court of Appeals issued an unpublished opinion in the matter of Woodland Estates, LLC v. City of Sterling Heights and County of Macomb. The Woodland Estates case should be taken as a warning to developers. This case illustrates the importance of obtaining legal advice from an attorney throughout all stages of the development process. The Developer in this case may have been able to recoup a substantial sum of money from the Government if it had asserted its rights in a timely fashion. Real estate developers must take considerable care to ensure that they act diligently in pursuing their rights as time is of the essence.

BACKGROUND

Woodland Estates, LLC (the “Developer”) filed a lawsuit against the City of Sterling Heights and the County of Macomb (the “Government”) regarding a Condominium Project located in Sterling Heights, MI. The case centered on the Developer’s allegation that it was entitled to monetary compensation from the Government based on an inverse condemnation theory. Inverse condemnation is a term used to describe a situation in which the government takes private property but fails to pay the compensation required by the Fifth Amendment of the Constitution. As a result, the property owner typically has to sue to obtain the required just compensation.

In 2003 the Developer purchased a five-acre parcel of property in Sterling Heights upon which the Condominium Project was to be developed. When the Developer attempted to obtain permission from the Government to develop the property, the Government informed the Developer that a portion of the property (a 92-foot wide tract of land across the property) could not be developed because the Government anticipated that land would be used in a future expansion of 18 mile road. This left the Developer with a five-acre parcel of property upon which only 3.88 acres could be developed for the Condominium Project (the remaining 1.12 acres was left undeveloped and reserved for the Government’s eventual expansion of the road).

The Master Deed of the Condominium Project was recorded on February 6, 2006. The legal description of the property contained in the Master Deed included the 3.88 acres of land that could be developed as well as the 1.12 acres of land that could not be developed. One month later, the Developer recorded a Consent to Submission of Real Property to Condominium Project which essentially stated that the Developer was giving consent for the entire property to be governed by the Master Deed. The Consent to Submission also contained the same legal description of the property including both the 3.88 acres that could be developed and the 1.12 acres that could not be developed. The Developer filed the lawsuit against the Government on December 30, 2014 claiming that the Government was required to compensate the Developer under an inverse condemnation theory.

THE COURT’S DECISION

The Trial Court originally granted the Government’s request for dismissal on the basis that the six-year statute of limitations for pursuing an inverse condemnation claim had run. The Developer then appealed and the Court of Appeals affirmed the Trial Court’s decision. The Appellate Court ruled on the following arguments brought forth by the Developer:

Whether the application of a statute of limitations defense to an inverse condemnation claim is constitutional; and

If a statute of limitations defense is constitutional, as applied to an inverse condemnation claim, whether the appropriate limitations period should be six years or fifteen years.

The Court first ruled on the constitutional issue and stated that the Michigan Supreme Court as well as the United States Supreme Court have both held it constitutionally permissible to apply a statute of limitations to a constitutional claim. The Court cited the cases of Hart v. Detroit, 416 Mich 488, 503; 331 NW2d 438 (1982); United States v. Dickinson, 331 US 745, 747; 67 S Ct 1382; 91 L Ed 1789 (1947); and Block v. North Dakota ex rel Bd of Univ & Sch Lands, 461 US 273, 292; 103 S Ct 1811; 75 L Ed 2d 840 (1983) as authority.

Moving next to the question of whether the appropriate limitations period was six years or fifteen years, the Court stated

… the proper statute of limitations for an inverse condemnation claim is either six years pursuant to MCL 600.5813 and Hart, 416 Mich at 503, where the plaintiff does not maintain an interest in the property, or 15 years pursuant to MCL 600.5801(4) and Difronzo, 166 Mich App at 153-154, where the plaintiff does maintain an ownership interest.

The Court went on to explain that under the Michigan Condominium Act, condominium projects are made up of only two things: condominium units and common elements. Based on the language contained in the Master Deed and the Michigan Condominium Act, the Court held that the 1.12 acres of land reserved for the Government was classified as “general common element” land in the Condominium Project. Accordingly, that land is owned equally among the co-owners of the Condominium Project pursuant to the Master Deed.

The Court further stated that since the Developer was not a co-owner (since it did not own any units in the Condominium Project) it did not have any ownership interest in the property at issue. Therefore, the Court held that the appropriate statute of limitations period was six years. Because the Developer filed the Consent to Submission in March of 2006, the statute of limitations ran in March of 2012 and the Trial Court correctly dismissed the Developer’s lawsuit against the Government.

CONCLUSION

As previously mentioned, the Woodland Estates case should be taken as a warning to developers. Because the Developer did not obtain adequate and timely legal advice at the time it acquired the property, the Developer lost a significant amount of money. In fact, the amount of compensation owed by the Government to the Developer would be easy to calculate since the Condominium Project was initially intended to contain 17 or 18 units as opposed to the 11 that were developed and sold as a result of the inability to build on the 1.12 acres reserved for the Government. Accordingly, experienced real estate attorneys should be consulted from the beginning of the process through the end.

Brandan Hallaq is an attorney in our Livonia office where he focuses his practice in the areas of business and real estate law. He may be reached at (734) 261-2400 or bhallaq@cmda-law.com.

Congratulations to Brandan A. Hallaq who was sworn in as an attorney on November 1, 2016 during a ceremony in Presiding Judge Hala Jarbou’s courtroom in Oakland County Circuit Court. The swearing-in ceremony is a significant event in the life of a lawyer and signifies the day when years of hard work and determination reach fruition.

Mr. Hallaq joined CMDA in 2015 as a law clerk. Attorneys and support staff immediately took to his thoroughness, dependability and kind personality. When he passed Michigan’s bar exam last month, we were delighted he accepted the Firm’s offer to continue his legal career at CMDA.

Mr. Hallaq focuses his practice in the areas of business and real estate law. He received a Juris Doctor degree from Wayne State University Law School and a Bachelor of Arts degree from Wayne State University.